FACTS:
A BIC designates Broker A to represent a seller-client, and Broker B to represent a buyer-client after both principals provide written authorization for designated dual agency. Prior to being designated dual agents, neither Broker A nor Broker B had prior confidential information about the principals. Further, the BIC reminds Broker A and Broker B not to share any confidential information about their clients without the clients’ permission.
The next day, Broker A and Broker B have a conversation while in the office. Broker A tells Broker B that their seller-client will accept any amount over asking price because they are going through a tumultuous divorce.
Broker B shares the information about the seller with their buyer-client. Later that evening, the buyer-client submits an offer that is $5k over the asking price to the seller. The seller accepts the offer, and the parties go under contract.
ISSUE: Did Broker A comply with Rule 58A .0104?
ANALYSIS: No. Rule 58A .0104(k) and (l) state the broker acting as a designated dual agent for one party shall not, without their client’s permission, disclose to the other party or the broker designated to represent the other party: “(1) that a party may agree to a price, terms, or any conditions of sale other than those offered; (2) the motivation of a party for engaging in the transaction, unless disclosure is otherwise required by statute or rule; and (3) any information about a party that the party has identified as confidential, unless disclosure is otherwise required by statute or rule”.
The advantage of designated dual agency over standard dual agency is that each of the firm’s clients (seller and buyer) receive representation more like single agency than dual agency. Designated dual agency allows agents to fully represent the interests of their respective clients, allowing agents to advise their clients during the transaction. This is different than the typical dual agency situation where client advocacy is lost because the dual agent may not advocate for one client to the detriment of the other client.
Moreover, a designated dual agent is required to act only in the best interests of their client, and this includes ensuring confidential information is not shared with anyone, including the opposing designated party, without permission, unless otherwise required by law.
The Commission recommends a BIC develop written office procedures and policies to maintain the confidentiality of client information by preventing improper disclosure in designated dual agency transactions.
In this scenario, Broker A was designated to represent the exclusive interest of the seller-client and should not have disclosed any confidential information to Broker B without the seller’s permission pursuant to Rule 58A .0104(k).
If, as here, a designated agent learns confidential information after becoming designated, they have an obligation to represent their clients’ interest to the best of their ability and disclose the information. However, Broker A and the brokerage may be liable due to the disclosure of confidential information by Broker A. Moreover, as a result of Broker A disclosing confidential information, i.e., that the seller-client would accept any price over asking due to their pending divorce, they may be subject to disciplinary action by the Commission for failing to adhere to Rule 58A .0104.
RESOURCES:
N.C.G.S. § 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0104(k)(l)
Articles: 2022-2023 General Update Course
Dual Agency – Authorization, Disclosure and Safeguarding Confidential Information
Video Link: https://share.synthesia.io/f081de05-df29-4a33-9a8b-45f5e5b125ab[MB1]
Do you need documents read aloud? Did you know that Commission publications in a PDF format can be read aloud as well? Take a look at this video to learn more.
Christy Evans, Consumer Protection Officer, spoke at Coldwell Banker Howard Perry and Walston, on August 6th.
Steve Fussel, Chief Consumer Protection Officer, spoke at PNC Bank, on August 7th.
Brian Heath, Consumer Protection Officer, spoke at Premier Advantage Realty, on August 7th.
Bruce Rinne, Information Officer, spoke at Raleigh Regional Association of REALTORS®, on August 7th.
Charlie Moody, Deputy Legal Counsel, spoke at Orange Chatham Association of REALTORS®, on August 15th.
Bruce Rinne, Information Officer, spoke at Lantern Realty and Development LLC, on August 20th.
Miriam Baer, Executive Director, spoke at the Neuse River Region Association of REALTORS®, on August 22nd.
Dee Bigelow, Information Officer, spoke at Keller Williams Realty Elite, on August 27th.
Part Two of an in-depth Five-Part series on the Complaint and Disciplinary Process in Regulatory Affairs. See Part One “Navigating Complaints: A How-to Guide” from the August 2024 eBulletin.
In Part One of our series, we explored the complaint and investigative process in Regulatory Affairs. In Part Two, we shift our focus to an examination of what happens once an investigation is complete.
Once an investigation is complete, Commission staff conduct a thorough review of the evidence obtained in order to make a determination as to the appropriate course of action in a case. If there is sufficient evidence of the violation of the Real Estate License Law (NCGS 93A) or Commission rules (NCAC 58A), the case is assessed to determine if it meets the legal standard for “probable cause.” Probable cause exists when there is sufficient evidence to cause a reasonably prudent person to believe that a violation of the License Law and/or Commission rules has occurred.
If there is a lack of sufficient evidence that there has been a violation, the case is closed without further action. Sufficient evidence means evidence that supports a violation and is admissible in an administrative hearing. A Commission staff attorney reviews all cases once they are complete to make this assessment. A case also may be closed without action when the investigation reveals a lack of jurisdiction. A case that is closed without action does not constitute a disciplinary action. It also does not necessarily mean the broker used best practices in the situation.
A case may be closed with a warning to the respondent when there is an alleged violation, but the misconduct is technical in nature or a minor deviation and does not warrant further action. A closing letter is issued that cautions the respondent from taking similar action in the future and reminds the respondent of the relevant law and/or rules applicable to the conduct. The closing letter containing the warning remains permanently in the licensee’s record but does not constitute a disciplinary action.
When it appears that there may be probable cause to warrant disciplinary action, the case undergoes more in-depth consideration. After the investigation is complete, the case is brought to the entire legal team and the Executive Director for review and discussion. The case is then presented to the Commission for its determination of probable cause with a recommendation from the Executive Director to either order a hearing or close the case with a warning, or simply close the matter without action.
Only the Commission members themselves can order a hearing against a respondent (or direct staff to pursue injunctions against respondents practicing real estate brokerage without a license). The Commission receives a summary of the allegations and evidence produced during the course of the investigation. To ensure impartiality and fairness and avoid conflicts of interest, this summary is anonymous. Commission members who may have prior knowledge of a respondent are recused from the consideration of the case. If the Commission finds probable cause in a case, the Commission may order a hearing, or issue a formal “close and warn” letter. A closing letter that cautions the respondent(s) is not a disciplinary action. If the Commission does not find probable cause, the case is closed without further action.
After the Commission makes a determination as to probable cause, a case status report (CSR) is sent to the respondent and complaining witness. The CSR informs the recipient of the Commission’s decision. Most importantly, the CSR and accompanying letter informs respondents against whom a hearing is called of the next steps in the regulatory process and the respondent’s rights by explaining:
Commission staff strongly encourage a respondent to seek the advice of a private attorney. Staff attorneys can provide information to respondents on procedural aspects of a case; however, they cannot give legal advice to respondents.
Voluntary Surrender
A respondent may ask to voluntarily surrender the respondent’s license for a specified or permanent period without the need for a hearing. The staff attorney assigned to handle the case must consider requests for a voluntary surrender on a case-by-case basis; there are situations when it is not appropriate. If it is appropriate and a respondent consents to a voluntary surrender, the respondent does not expressly admit or deny misconduct and surrenders any renewal or reinstatement right the respondent may possess. This arrangement is reflected in writing and is referred to as a Consent to Voluntary Surrender (CVS). The CVS must be signed by the respondent, and if applicable by the respondent’s attorney and must be presented to and approved by the Commission before it is effective. To learn more about the complaint process or to file a complaint, go to the Commission’s website, or contact Regulatory Affairs at RA@ncrec.gov or 919-719-9180.
House Bill 973 changed the laws relating to human trafficking in lodging establishments and vacation rentals. Starting July 1, 2025, property managers listing vacation rentals in North Carolina must implement a procedure for reporting suspected human trafficking. This new mandate is part of N.C. Gen. Stat. § 42A-39(b) and requires property managers, along with their employees and third-party contractors involved in listing, supervising, maintaining, housekeeping, and check-in/check-out services for vacation rentals, to undergo human trafficking awareness training.
Mandatory Training for All Staff Involved in Vacation Rentals
The North Carolina Department of Labor, in collaboration with the North Carolina Human Trafficking Commission, the North Carolina Restaurant and Lodging Association, and the Department of Health and Human Services, will develop or identify appropriate training courses. These courses will be accessible electronically, in person, or in a classroom setting at no cost to ensure all individuals required to complete the training are well-informed and educated about human trafficking.
Training Deadlines and Requirements
For vacation rentals listed on or after July 1, 2025, property managers must complete the training before the rental is listed. Employees and third-party contractors must complete the training within 60 days of starting their service and then every two years. For rentals already listed before July 1, 2025, all property managers, employees, and contracted individuals must complete their training by June 30, 2027, and renew every two years thereafter.
Role of Accommodation Facilitators
Accommodation facilitators, including real estate brokers, that market and accept payment for the rental, or list a rental on a forum, platform, or other application for a fee or other consideration shall notify property managers of their training requirements and require property managers to certify that the required training has been completed. N.C. Gen. Stat. § 42A-39(e).
Penalties for Non-Compliance
Non-compliance with these requirements carries significant penalties: $500 for the first violation, $1,000 for the second, and $2,000 for each subsequent violation. Additionally, it is considered an unfair trade practice for property managers to intentionally misstate their completion of the required human trafficking awareness training. These measures aim to increase vigilance and education around human trafficking, ensuring that vacation rental properties in North Carolina contribute to a safer and more aware community.
You may have just finished your Continuing Education (CE) requirements for the 2023-2024 license year, but it is never too early to complete your CE courses. In fact, if you wish to really get a jump start on your CE education, it is possible to carry over credit for one Elective course to the following license year.
Let’s say that you have already taken a NCREC-approved Elective CE course for the current 2024-2025 license year. Now you receive information about another Elective course that you would really like to take, but you are sad that it will not also provide CE credit. Good news! While licensees can always take as many courses as they wish each year for educational purposes, they can receive CE Elective credit for up to 2 NCREC-approved courses: one credit for the current license year and one course credit will carryover for Elective CE credit in the next license year.
Be aware that carry over credit is not possible for any Update course since Update courses must be taken for credit only in the license year for which they are written. The Commission’s 12-hour Broker-in-Charge course is the only Elective course that can only be credited in the year in which it is completed.
Have you taken your CE courses for 2024-2025? It is not too early for you to complete your required CE for this license year.
Video: https://share.synthesia.io/aca6331b-a651-4715-b0ba-d0f1f4a73185
Is your firm address the same as your primary residence? If so, did you know that your primary residence address will be listed in Commission records?
Brokers should understand that their firm address is considered public information and will be displayed on the North Carolina Real Estate Commission’s website. If a broker is using their home address as their principal place of business, the Commission will publish the brokers’ home address in their license record, and it will be accessible to the public. The Commission is unable to restrict the display of this information on the Commission’s website.
If you renewed your license after June 30th, your license was reinstated on inactive status. A broker must submit the License Activation and Affiliation Form 2.08 to activate their license and affiliate with a Broker-in-Charge.
Upon a broker’s submission of Form 2.08, Rule 58A .0504 indicates that their license status is active. However, brokers should allow the Commission time to adequately process the form and update their license record. While the form is processing, it is unnecessary to submit duplicate forms, send emails, or initiate follow-up phone calls with Commission staff.
If a broker does not receive written acknowledgment form the Commission within 30 days of the date shown on the form, the broker must cease brokerage activities pending receipt of the written acknowledgment from the Commission.
We are two months into the new license year and less than 2,000 brokers have completed the mandatory 2024-2025 Update course. In last month’s eBulletin, we published an article stressing the importance of completing your education early to make you more knowledgeable, better informed, and more aware of your obligations and duties to protect the public.
Not only is the information contained in this course essential for properly practicing real estate brokerage, but we also believe you will have fun learning it. This year’s course is entitled “Playing to Win” and is built around a game show theme. We did this to maximize engagement in the courses and to create lots of opportunities for interaction between the instructor and the students. We know students learn best when they are engaged and having fun. For the first time ever, we have powered this year’s Update courses with AI tools to create better quality videos and to be more innovative in conveying information. There are also multiple resources shared in this course that brokers can use to further develop their knowledge on these topics.
For brokers taking the General Update (GENUP) course, the topics covered are:
For Brokers-In-Charge and BIC-Eligible Brokers, the Broker-In-Charge Update (BICUP) course covers:
You can use the Commission’s CE Course Schedule Search page to find a scheduled Update course being offered by a certified education provider. The course number for the Update course differs based on which one you need to take and how it is being delivered:
5925 – Synchronous (live online) GENUP
9925 – In-Person GENUP
5825 – Synchronous (live online) BICUP
8825 – In-Person BICUP
Take action now and complete your education to ensure you are well-prepared for the 2024-2025 license year!